The (Unintended) Impact of the Affordable Care Act on Divorce

"Reprinted
with permission from the February 11 issue of Texas Lawyer. (c) 2015 ALM Media
Properties, LLC. Further duplication without permission is prohibited.
All rights reserved."

Health insurance used to keep couples together. Now, the
Affordable Care Act may give spouses a reason to part ways.

Historically, a divorce could have a
dramatic impact on health care coverage, particularly for people who relied on
an employed spouse for health insurance. The reality of losing health insurance
prevented some spouses from pursuing divorce, and in other cases a divorce
would result in a loss of coverage, often for years. Now that a year has
passed, ACA and its health insurance exchanges have had an impact on the
divorce dynamic. Spouses may no longer be dependent upon breadwinner spouses'
employer-provided health insurance coverage. And, in some cases, given
ACA-provided subsidies, combined insurance costs may be lower if a couple
divorces. Here are five ways in which ACA might change divorce.

1. A benefit to the previously
dependent spouse. It is now easier for older, unemployed or otherwise
uninsurable people to secure health insurance, as a result of the ACA. Before
the ACA, securing health insurance independently could be a difficult,
expensive and sometimes impossible proposition. Spouses with preexisting
conditions might have avoided thoughts of divorce—or pursuit of divorce—for
fear of losing coverage. Before the ADA, a breadwinner spouse would obtain
health insurance through employment that would cover children under the age of
18 and his or her other spouse, whether that spouse was self-employed, staying
home to raise the children or disabled.

After divorce, the nonemployed spouse would
have to obtain insurance independently, as she or he would no longer be
eligible for coverage under the breadwinner's old policy, except temporarily
through the Consolidated Omnibus Budget Reconciliation Act.

Obtaining private insurance was no
simple task. A previously dependent spouse who was not able to obtain
employment due to age, health or lack of job history was virtually uninsurable
because most health insurance is provided through employment. The ACA changed
this dynamic by providing a path and options for coverage for previously
dependent spouses. Individuals can now secure coverage—at different benefit
levels and costs—regardless of their employment status and preexisting
conditions. An individual who divorces can also enroll in health coverage
outside the ACA's open enrollment period because the ACA identifies divorce as
a "change-in-life event."

2. Changing the negotiations. Before
the ACA, negotiations over the division of community property could be affected
by health care costs. The previously dependent, or uninsurable, spouse might
have needed to maximize liquidity to cover anticipated out-of-pocket health
care costs. This could mean the difference between staying in a house and
moving, or otherwise relinquishing illiquid assets. Under the ACA, such a
spouse can participate in the health insurance exchange to secure coverage,
which levels the playing field with respect to divvying the marital estate.

The ACA also impacts settlement
negotiations regarding children's expenses following high school graduation.
While Texas does not legally require a parent to support a college-aged child,
the reality is that many parents anticipate that they will be financially
supporting their children during this time. As such, college costs, including the
payment of health care expenses, are often points of negotiation between
divorcing spouses. The ACA's provisions allowing insureds to keep children on
family policies through age 26 gives more certainty to the divorcing parties
with respect to the health-related costs that might be incurred in the future,
as well as the availability of insurance for the adult child.

3. Potential effects on spousal
maintenance claims. In Texas, a spouse who lacks sufficient resources to meet
minimum reasonable needs after divorce may qualify for spousal maintenance.
These minimum reasonable needs include health care costs, which can be
significant if the spouse has a physical or mental disability. For example, in
situations in which one spouse anticipates short or long-term medical care,
those anticipated costs could be taken into account when determining whether
the spouse who needs care qualifies to receive spousal maintenance, and, if so,
the amount of the spousal maintenance award. The availability of health
insurance through the ACA may be a factor in evaluating the viability of
spousal maintenance claims. Additionally, now that the ACA is available, a
spouse obligated to pay spousal maintenance might seek to modify prior awards
that were based on health care costs.

4. Impact on women. While not unique to
divorced women, historically health insurance premiums for women were more
costly than those for men. The ACA has precluded that practice.

5. Unintended consequences. Some
pundits and economists, upon evaluating the subsidies available to lower and
middle-income couples, have suggested that the ACA could, given its parameters,
actually encourage divorce. Under the ACA, in general, households with incomes
from 100 percent to 400 percent of the poverty level are eligible for subsidies
on their health insurance premiums paid through the ACA. Some couples in this
income range would pay lower overall health insurance premiums if they divorced
and the lower-income ex-spouse was responsible for health coverage for herself
or himself and any children. This result of the subsidy rules is similar to the
marriage penalty for certain couples who file income taxes jointly.

In sum, the ACA has dramatically
changed the marital playing field by instituting health care changes that, in
turn, may in some cases provide financial incentive for couples to consider
divorce as a possibility. This unintended consequence is certainly a legal and
socio-economic issue to track as the ADA becomes more institutionalized in
American society.

"Reprinted
with permission from the February 11 issue of Texas Lawyer. (c) 2015 ALM Media
Properties, LLC. Further duplication without permission is prohibited.
All rights reserved.”